Tipping Culture

Okay .... I woke up and chose Rambling this morning .... it was that or violence and I think rambling on the internet is ... probably .... the choice less likely to end up with me either dead, injured, or in jail. So it was likely just a matter of time today before I ran across SOMETHING that got the ole grey matter spinning, and I just came across a post "If you can't afford to tip, you can't afford to eat out." ... and ... well ... I can't say I fully disagree with that, but at the same time I think that the tipping culture in the US has gotten a wee bit out of hand.

There are a lot of factors in this, not the least of which is tipping, when I was growing up, wasn't an automatic. Tipping was a 'thank you' to a server that did an above average job, or, at the least was attentive and helpful in their service. Then it became expected that a tip of a % of the bill would be left which in some cases led to reduced service shown to smaller groups or individuals because the servers didn't see those customers as 'worth the time' .... after all a 10% tip on a $10 tab was only going to be $1. Then the expected % began to raise, and tip jars started showing up everywhere, fast food, gas stations, doughnut shops, and delis, and particularly in the chain 'fast service' restaurants ... those places that are arguably a step up from fast food, but still aren't a full sit down and order restaurant.

But this can be easy to pawn off as the service workers getting greedy or just wanting to bleed more money out of the customers, but there's more to it than that. Payroll and taxation have led to this as well as the failure to increase minimum wage to at least somewhat follow inflation if nothing else. You see restaurants and other such places got laws passed that said that if their servers accepted tips they could be paid below minimum wage .... more over while those employees were legally required to claim the tips on their income tax ... the employer was NOT responsible for matching the social security and medicare taxes on the tip income. Which made for a HUGE savings for the employer and a headache (at best) for the servers. 

Of course the % of the bill that was expected as a tip increased .... cost of living has continually gone up, but minimum wage has not ... add in that servers can, legally, be paid BELOW minimum wage and their only way to increase their income was to push for higher tip percentages ... in most cases they aren't physically able to serve more PEOPLE, therefore they must collect more per person or group served in TIPS to stay above water.

Likewise as wages have stagnated and the cost of living has continued to rise more and more types of employees have sought to supplement their paycheck by leaning on the generosity of the customer. Now in most cases these positions don't officially receive tips and, therefore don't have the 'pay below minimum wage issue .... they do have the issue that the Federal minimum wage has been flat since 2009 at 7.25 an hour (or roughly 15,000 a year assuming a 40/week work schedule) ... in short I would say that most everyone would be better off going back to a system in which servers were paid for their work by their employers at a rate for sustainable living and tipping went back to being a gratuity for good or exceptional service that supplemented the income rather than an expected handout that people relied upon to put food on their own table.

Understanding that it would, likely, raise the cost of eating out ... but it would be an equitable and transparent system again. A system that would better, and more reliably, compensate the servers for their work ... but it also brings up another discussion. The Minimum Wage in general. There are a ton of issues here and a lot to unpack. 1 - it is a MINIMUM wage, meaning companies can (and many do) compensate their employees at a higher rate, 2 - many States HAVE increased the minimum wage within the State .... but those don't fully address the issue. 

You see part of the problem is that the Federal Minimum wage ... and most of the state laws where they have increased state minimum above the federal ... they're static laws ... they don't really take into account the dynamics of economy and, in some ways, their existence can actively stifle salaries. The existence of a minimum wage puts a floor down, and as a result that is where building will start it is setting the base line which is fine, that's what it's supposed to do, but as cost of living goes, as it does, invariably up that floor remains static and, like it or not, every pay rate out there is ultimately tied to that floor as companies and corporations will value everything, to one degree or another, off of that floor. (At least up to a certain level, once you go into the executive levels of a corporation you will undoubtedly be in an area where no one is thinking of that floor any more.)

That is to say, the minimum wage staying low has a tethering effect on higher level positions as well because the perceived value of those positions will, at some level, be based on that 'minimum wage' job often without real regard to the true cost associated with the requirements of the job. ... The 'entry level' position that lists a college degree for example (but could often be done just as easily by someone with a HS diploma) may start at $15 an hour ... but that doesn't really take into account the debt that college degree represents and is more likely to be set based on 'amount over minimum wage' rather than calculations related to the average cost of college tuition.

Now raising the minimum wage has it's own issues, raised minimum wage results increased labor costs across the board and the floor (and everything above that) will, ultimately, get raised and all of those scales get re-adjusted. This generally results in increased costs of goods and services (and often some lower profits as businesses will eat some of the additional costs to avoid raising prices and losing market share ... this can have it's own issues from slower business growth or loss of buffer funds to protect against market downturns or slowdowns depending on the industry in question.) The result of which is usually not as dramatic of an increase in purchasing power as expected, but does, over all, allow the economy to re-balance.

Because $7.25 isn't worth what $7.25 was in 2009 when the latest minimum wage went into effect. While it isn't huge ... that $7.25 minimum wage in 2009 to have the same purchasing power as today would need to be almost $11/hr and, taking into account that the law that raised it to 7.25 was passed in 2007 it would need to be about $11.24/hr to match what $7.25 was worth when the law passed. That's almost $23,380 / yr ... compared to the $15,000/yr that the current minimum wage represents. With the current national average rent for a 1 bedroom apartment at $1,635/month that's $19,620/year .... not including food, utilities, and other requirements for living .... no I won't say that I believe that someone should be able to raise a family on a single minimum wage income .... but I do feel that it's not unreasonable to believe that 1 person living alone should be able to take care of themselves on one, and $15,000 a year is more of an insult than anything else at this point ... and that number has an effect on the rest of the pay spectrum. It also has to be considered that it also has an effect on government dependency ... the more people that fall below those numbers the more people that need those assistance programs ... and, in turn, the more money those programs need, it's not unreasonable to believe that a solid increase to the minimum wage could, in essence save the taxpayer money. 

We need to look at the minimum wage ... and when we do I would recommend that rather than setting a static monetary amount as has been done in the past, we tie the minimum wage to an index, setting a base point, a review period, and adjust the wage regularly and automatically based on the index ... be it inflation, avg cost of living, or whatever. Yes the law can be reviewed and changed down the road as well, but putting in an automatic adjustment periodically will prevent a case where it stagnates as it has since the 2007 law ... 18 years since the last adjustment was passed into law ... 16 since it took effect.